SCA makes changes in brokers, disclosure, transparency and margin trading regulations

The Emirates Securities and Commodities Authority (SCA) has approved amendments to a number of rules concerning securities brokers and margin trading and Article 36 of the Disclosure and Transparency Regulation.

During the meeting, which was presided over by its chairman, H.E. Engineer Sultan bin Saeed Al-Mansoori, Minister of Economy, the board also approved a request by securities markets in the country to charge listing fees from public joint stock companies (PJSCs). It also approved the setting up of a program for training of UAE nationals working in brokerage companies and those interested in working in that sector.

The meeting, which was the fourth by the newly reconstituted board, was attended by all board members, including H.E. Mohammed bin Ali bin Zayed Al-Falasi, Deputy Board Chairman, H.E. Abdullah Salim Al-Turifi, SCA Chief Executive Officer, H.E. Mubarak Rashid Al-Mansoori, H.E. Mohammed Ali Ahmed Al-Dhahiri, H.E. Abdullah bin Ali Al-Hamli and H.E. Butti Khalifa bin Darwish Al-Falasi. Also present at the meeting were H.E. Ibrahim Al-Za'abi, Deputy CEO for Licensing, Supervision and Enforcement Affairs, who is the board's Rapporteur and H.E. Maryam Al-Suwaidi, Deputy CEO for Legal Affairs, Issuance and Research, as the board's Coordinator.

A number of important issues related to the securities sector were discussed and reviewed during the meeting. They include the following:

Training of UAE nationals:

After reviewing the list of percentage of UAE nationals working in the biggest ten brokerage companies in the country, the board approved a suggestion which calls for setting up of a special training program for UAE nationals working in the securities sector and those interested in working in that sector. The suggestion calls for challenging the SCA Training Center to come up with special training programs that would train and qualify UAE nationals working in the securities sector and those interested in working in the sector to pass the CISI exams. The cost for both the training programs and the CISI examinations fees for UAE nationals will be borne by the SCA.

Amendment of regulations

Based on its commitment to protect the rights of all stakeholders in the securities sector, particularly the investors and the markets alike, the board approved the amendment of Article 23 of the Brokers Regulation concerning the SCA's prerogatives in handling bank guarantee. The new amendment says: "If a brokerage firm failed to meet its obligations on time regarding a deal that had been struck through it, the SCA or the board of the securities market may act as it deems fit with the bank guarantee (partially or fully) to meet the obligations of the brokerage firm towards its investors or the market, or in implementation of the SCA's decision in this regard."

The brokerage company, in this regard, may appeal against this action at a court of lawful jurisdiction within a period of 30 days from the date it became aware of the decision.

The board also approved an amendment on the current text of Article (9) of the Margin Trading Regulation. The amendment now allows margin trading without necessarily identifying the securities being traded, but all legal guarantees for the brokerage firm regarding its rights in selling securities it has financed must be met.

The decision, which is in line with the SCA's regulatory and supervisory role, follows a request by the securities markets to be allowed to not identify securities being traded on margin trading, in order to start enforcing the SCA Board Resolution No. (25/R) of 2008 on a sound legal and technical basis.

To eliminate insider trading and rumors on the market, the board believes in the need to amend the text of Article (36) of the Disclosure and Transparency Regulation concerning initial reports, in view of the latter's significance in giving valuable information about a company's situation. The board, therefore, approved the amendment of the aforementioned article to make it compulsory upon all companies which have listed their securities on UAE securities markets to furnish the SCA and the securities markets with their initial reports.

Awareness activities and programs

The board approved a memo containing the SCA's programs and activities for the year 2011. The programs include awareness programs to educate the public about many important issues including the new SCA regulations like the mutual fund regulations, Twin-Peaks system of securities markets, better understanding of the issue of investment on the securities markets and education programs for financial brokers, analysts and other players of the securities market sector, as well as many other programs aimed at improving the level of awareness in investment on the securities markets and the role of the SCA and the markets.

The mechanisms for the implementation of the programs include holding of a number of specialized lectures, workshops and conferences, and other modern mediums like the print and the electronic media.

Recommendations

The board also approved a report on the recommendations of the SCA's Advisory Board regarding three major issues, including new regulatory and supervisory models, securities markets in the UAE and the new principles of the International Organization of Securities Commissions (IOSCO). The approval came in the light of the new regulatory and supervision policy following the latest developments in the regulatory systems that followed the global financial crisis and concerning financial markets.

The report also deals with the mechanisms and measures which can lead to increase in liquidity and trading values on the bourses and the securities markets, as well as the steps the SCA can take – according to priority – to boost investors confidence in the markets. It noted that steps taken by the government had played an effective role in boosting stability on the market and recommended the encouraging of family and private companies to list on the markets

Regarding the new IOSCO principles, the report said the organization had adopted new policies and principles which deal with a number of issues, including regulating and management of systematic risks, the independence of auditors and supervising them, credit rating companies and putting in place mechanisms which allow regular review of legislation systems, organizing and monitoring of companies and institutions which provide for investors financial analysis and evaluation services.

The board approved SCA's plan of action which would enable it get the advantage of implementing those principles, taking into account the recommendations of the Advisory Board, although the SCA had actually taken a number of steps within the framework of many of the principles.

Sheikh Khalifa Government Excellence Program

The board watched a presentation on the SCA's preparation towards its participation in the Sheikh Khalifa Government Excellence Program, the challenges and difficulties the SCA faced on its way to winning two category prizes of the Award, including the "Institutional Excellence Award" for the (Major) category and the "Emirates Award for Government Excellence" for the (Best Practices) category.

The Sheikh Khalifa Government Excellence Program is within the framework of the UAE government's efforts to promote excellence among government institutions and to enhance the country's efforts in becoming a regional hub of the global economy, in manifestation of the vision of His Highness Sheikh Khalifa bin Zayed Al Nahyan, President of the United Arab Emirates.